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Adria to post loss in 2018, plans for the future

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Adria Airways, which has experienced a number of operational issues over the past few months related to staffing and equipment, expects to post a financial loss in 2018 for a second consecutive year. The carrier's CEO, Holger Kowarsch, said, "It won't be a positive result. Adria Airways is a privately owned company, so I will not reveal our forecast, however, the business surely won't be positive this year. With these oil prices, it is impossible. On a different note, revenues will considerably increase compared to last year". The Slovenian carrier, which has been cancelling or combining a select number of flights on an almost daily basis over the past month, has been forced to pay out hundreds of thousands of euros in compensation to affected customers and several million euros to wet-lease aircraft from other airlines. It comes after the carrier reported a loss of 5.4 million euros in 2017.

Mr Kowarsch told Slovenia's "Delo" that the route cause of the operational difficulties is a lack of crew affecting airlines across Europe. The company has also been forced to deny media reports that it is on the brink of bankruptcy. It noted, "We fully understand and accept discussions over flight irregularities but not that such are connected to our financial state. We wish to clarify that our financial status doesn’t influence and is not the reason for flight delays or cancellations as stated by some media. There has been an increase of 150% in the number of delayed flights in the European Union in 2018 compared to last year. Only in August, 56% of all flights were delayed. Adria Airways’ delays are way below the EU average, but this cannot be counted as an excuse since each irregularity damages the carrier. This year, Adria Airways significantly increased the number of aircraft in its fleet but the number of crew did not grow proportionally. Each unplanned absence of crew members due to sick leave or an unfit-to-fly condition could, together with unpredictable weather or technical issues, influence flight operations. In order to avoid flight cancellations, we decided to combine flights on numerous ocassions. Even though this was unpleasant for passengers, we believe that combining flights is a better solution than cancelling them". Mr Kowarsch noted that Adria currently has an insufficient number of standby crew but believes the issue will be resolved by November.

Commenting on the airline's future plans, the CEO noted, "We will have a similar number of flights this winter. We are considering additional flights for the coming summer season, and have started discussions with the airport. The problem is that Ljubljana Airport is operating at full capacity during peak hours. However, I am delighted with Fraport's decision to build a new terminal, which will also allow us to introduce additional flights. The terminal will be completed by the end of 2020, which is a bit of a long time for us. For the coming summer, we are looking at some northern destinations and thinking about Rome or Madrid. These airports are the main gateways to South America, but we are studying whether the routes are financially viable".

The first two years after the arrival of the Germans, Adria provided liquidity and financial sustainability through loans from the German company 4K KNDNS, one of the many in the 4K Invest group. KNDNS went bankrupt this year. We will see where they will shift money from this year.

The situation has been ridiculous, as is their explanation. If you can't keep up with your growth then you don't open seven new routes. It doesn't matter anyway since out of the seven half have already been cancelled.

well you open new routes when the risk of failure is least- that measn when oil is cheap. All other costs are fix. So when oil costs 40$ is a different story than when it costs 100$ like some 5 years ago. Today we are at 84 and rising !!

Not really.On a dollar basis they are 10-15 dollars less.BUT the dollar since then has greatly appreciated against the Euro and all other currencies.So essentially European airlines right now pay almost the same price for fuel as they did at the previous oil boom.

This is quite a polished article - the news in Slovenian media has been for the past two days, that JP is in serious financial trouble (ie owes a lot of money to fuel providers, airports etc), and there's a real possibility of CAA grounding its fleet due to JP's inability to finance its day to day operations.

Even Ščurić has backed down quite a bit from his Lufthansa conspiracy in an interview.

It's acctually quite simple - they will need another capital injection come Decembre/January. If they magically come up with several million EUR, then we'll know there's a bigger player behind all of this. If not, they will go bankrupt.

In one of the interview CEO clearly says they weren't making money last year with oil prices 30 USD/barrel lower than now and that they can't make profit at this level. So they made loss last year, which will increase this year (+all the wet leasing drama), and if oil doesn't go down the loss will continue.

I know it's hard to understand in Exyu, but airline cannot survive with continuous losses unless they have a rich uncle, which Adria at the moment doesn't.

I said that it is obvious that Adria modus operandi is collaborating with Lufthansa (most of aircraft is leased to Lufthansa, Eurowings, Austrian, Swiss + feeding routes from Priština, Tirana, Paderborn, in past Lodz + not a one Austrian, Swiss, Lufthansa and Eurowings flights from Ljubljana and those companies have hundreds of flights in region especially in Croatia + special task for Lufthansa group like VIE-MUC route several years ago to show that Lufthansa group "does not have monopol on that route") and by so many moves one can conclude 4K is cleaning and preparing company for Lufthansa.

4K is company is specialized in doing those jobs for others. In same cases they take companies, clean them (sack some workers, sell infrastructure, downsize, unification...) and than sell to someone else (in some cases they knew who they will sell it in advance, before they buy problem company) and in some cases they buy companies with task to put it out of work (competition take this share of business).

So, I said that if 4K would be successful in task of cleaning company and making it profitable they will most likely do that for Lufthansa, but for sure if the will not be successful they will put Adria out of work (Lufthansa will not want problematic company). Just like Darwin. They will not have problem with that and will not think a second to do so. So it is simple: be successful and sell it to Lufthansa with some "profit" (reword for that job) or not successful, will not loose money in future and Adria will be closed.

'LH behind 4K' implies there was a contact between Slovenian governments and LH prior to selling the company. And that LH is financially backing 4K.

In reality there was a LH audit in JP just around the time of 4K stepping in. All of the acmi crumbs jp is getting are the result of that audit. And JP has been LH feeder since ... forever. So LH is 'behind' 4K just as much as they were behind Adria before 4K came in.

So yes, you did tweal your argument quite a bit since the privatisation took place - your currwcu argument is such, that you are right whichever direction this goes.

Do you even know how people function in Croatia (and Slovenia)? Croatian government would NEVER go for this option. Maybe a merge done by a third player but they would ask for another name. Yes, neutral, but different.

Why? OU is not in such a bad financial or operational situation. Don’t get me wrong, OU is not in a great financial situation either, but at least they plan on generating some profit this year. Also, these two airlines have bases that are too close to each other. For operational reasons they would need to choose which one to move forward with. Also, this would increase commonality costs, as OU doesn’t have CRJs (they wet lease them) or Saabs and Adria doesn’t have Dashes. Finally, OU and Adria have different business models: OU wants to grow into a hub carrier, while Adria is shifting more and more towards P2P and ACMI.

Such a messy summer for Adria. From a lot of optimism I had for them, they completely flopped. While I do agree that some of the media reports are over the top, I really do fear for Adria,, knowing how 4K (mis)treated Darwin and had now issue bankrupting the airline in months.

Also I'm not over the moon with information that one of 4Ks subsidiaries is issuing Adria with loans. Basically 4K is filling its coffers while Adria is struggling.

Selling the brand name was a master stroke from 4K. They sold brand to themselves, manage to post profit for Adria that way and when they sell Adria they will not only get money from the sale but will also get money each year for renting the brand to someone.

The funny thing is, these guys (and I mean 4K) will soon take over Croatia Airlines and Montenegro Airlines. Wait and see next year. And although I know people don't believe it, you will also see Lufthansa's involvement next year.

Private company. They are burning their own money. I'm not too concerned. Even if they go bust, another player will come and take their sport. Only unfortunate thing would be the end of the Adria brand after 60+ years but even that is not owned by the airline anymore but by Germans.

They are not burning their own money... They don't have any assets and capital. Who will be left to cover the financial hole that they will leave behind? Small businesses, passengers and employees, business partners...

Employees have been around far too long and only a quick glance at the aviation market would have them in a better airline in very short time. But it seems they prefer to stay on the Titanic and play along with the orchestra till the very end. Don’t feel sorry for the, the entire world is looking for pilots at the moment.

Passengers: anybody buying tickets with JP directly without travel insurance or insured credit card is insane. Given all the media publicity they should now better by now.

Suppliers: they can easily stop supplying their goods or ground an aircraft and thus force Adria to either pay or go straight into liqudiation, which would hopefully result in some debts being paid off to suppliers.

The Swiss authorities are preparing to launch a criminal investigation on the supposedly fake bankruptcy of Darwin and emptying the company's account by 4K: https://www.rsi.ch/news/ticino-e-grigioni-e-insubria/Darwin-l%E2%80%99inchiesta-decolla-10990190.html

Is there a chance for SOF to be increased next summer? CR9 was operated in some days and not Saab as initially planned meaning route is doing great. JU has already upgraded BEG-SOF to A319 on some days next year.I hope silly FB wakes up and operates to ZAG or SKP. There is clearly demand to connect Balkan capitals.

JP will sooner or later be history, probably somewhere 2019-2021. Also there is no need for them on the market. Not every little village needs an own airport or an own airline. If this is thru all the European political heads, we will see a healing development for the good of all (passengers, taxpayers, employees, environment and citizens). Balkan politics would rather invest into faster rail links and better and faster public transport system. I am currently in Japan. Here u need for 500 km lit bit over 2 hours by train and Tokyo to Osaka there is every 5 to 8 minutes a Shinkansen travelling with 320 km/h max. Not one country in Europe can just near match what Japanese offer day by day. Did you know that Shinkansen sped trains network amounts to 2700 km. From 0600 to 2130h there is every couple minutes a train into all thr various directions, amounting to 100s of Shinkansen trains a day. Do you know what the total cumulated delay time is per day for all Shinkansen trains in Japan: 5 minutes. 5 god damn minutes. After 1 minute you are already entitled for compensation payment. Thats performance. Europe is losing ground, more and more!

The Swiss are launching an investigation into fraudulent bankurptcy of Darwin, where about 9 mil euros disappeared. Part of that money was used to keep JP machine rolling in the past year in hope of selling it. They will go bankrupt before the end of this year.

Yes, we are all aware Japan is having out-of-this world transportation. That's because JR East owns the land around the railways and lets it out, which is how they make a lot of money, that they can invest into modern technology. Even if the Balkans followed the same strategy, the economy of all Ex-Yu countries combined is way smaller then Japanese - meaning people wouldn't move closer to the rail and pay high rents just to be able to move between major cities quickly. So what's your point?

There is enough need for every nation to have a national carrier. And while I agree that every village doesn't need an airport, I disagree that every country doesn't. Airports and airlines help economy by opening doors for international business and tourism. If you don't have a national carrier, you are depended on others and can only hope that some other airline will want to connect the territories of your strategic efforts.

You are probably right though, Adria might collapse. But that's another discussion.

Not matching, Balkans is 2 centuries behind Asia. No chance to match but at least invest into infrastructure. How long is Belgrade waiting for a subway? 30, 40 years? How much more?? All Balkans care is this god damn past instead of looking ahead. Makes me so mad if I see how Asia is developing, same time our politicians discuss still WW2 topics.

Aviation market is a liberalized and free market, where nations have agreed to leave regulators behind. There is no space for taxpayers money injectiins if other airlines can do it for free. If there is demand, airlines will fly. If not, not. All other is a waste of money and could be invested in infrastructure. Just look at Bus Stations, even in Slovenia: Kranj, Ljubljana. It looks there like 1949

You cheerypicked the worst bus station in Slovenia for your argument. And even that one has been designated as temporary station for past few dacades. New location for the station has been set and construction should start in year or two (per incumbent mayor).

Fair points JU520 BEGLAX. I agree, Balkan politics are a very dark comedy. However, I think looking too much in the future will only over-promise things, let's first fix the current problems and then move to fast railways.

Pointing at bus stations - yes, that's exactly what I mean. First we need to solve the current problems and update the infrastructure to be at least on the level of current time. Then we can start talking about alternatives.

What is there to sell? Adria does not own any planes, it does not have lucrative slots at Heathrow, it has very poor long-term aircraft leasing contracts, its main market is very small, it doesn't even own it's name. So what would a perspective buyer see in Adria?

4k has failed in its promise. They came to Adria saying they would turn around the business. That they are turnaround specialist. It turned out they are now planning a second (in reality third) year with a loss and it increases each year.

Adria should talk to LOT and become LOT's partner in the Balkans (like Nordica became LOT's partner for Scandinavia and Baltic States). Adria could operate a few routes for LOT to feed their hub in Warsaw. With the help of LOT Adria could develop its network from LJU and build regional hub.

The situation at Adra is very serious and is no laughing matter. To my great sadness I think we will soon bid farewell to Adria.

- the company finances business almost exclusively with debts, and not capital. The share of debt in financing according to the latest data is already 95%.- the company is increasingly being financed at the expense of suppliers and with advance payments, with a significant increase in short-term operating liabilities.- Adria's uncovered loss on the last day of last year exceeds half of its share capital, which is one of the signs of long-term insolvency or insolvency.- liquidity is very poor.- Adria has not been able to do business in the past few years without the flow of funds from recapitalization or disposal of assets, and such a trend continues.- this year, the company predicts a new loss, which will further aggravate the capital structure.

"...Mr Kowarsch told Slovenia's "Delo" that the route cause of the operational difficulties is a lack of crew affecting airlines across Europe..."

I call it bs excuse!! If you pay fair market salaries then you would attract pilots and other personel. But you are not, and the fact that their is a huge demand in the world means you are not keeping up with times and therefore directly responsible for the bad performance of your airline. Don't blame staffing....OU has same issues and people continue to leave. Air Serbia on the other hand is "lucky" as their crews can not just pick up and go work in Europe because of not being memeber of EU...otherwise the flood gates would be open too.

So please Adria management stop with poor excuses and fix the problem or close the shop.

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